ShiftCarbon Inc. — Interim / Quarterly Report 2021

Sep 30, 2021

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ORGANIC GARAGE LTD.

Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited)

Organic Garage Ltd.

Interim Consolidated Statements of Financial Position

(Expressed in Canadian dollars)

(Unaudited)

Organic Garage Ltd. Interim Consolidated Statements of Financial Position (Expressed in Canadian dollars) (Unaudited)
		July 31,	January 31,
As at		2021	2021
		(unaudited)	(audited)
Assets
Current
Cash	$	2,525,972 $	1,628,586
Accounts receivable		155,564	166,272
Lease receivable (Note 7)		236,807	-
Inventory (Note 4)		1,424,568	1,405,131
Prepaid expenses and deposits (Note 5)		39,067	21,025
		4,381,978	3,221,014
Lease receivable non-current (Note 7)		231,631	-
Property and equipment (Note 6)		13,037,039	13,820,976
Prepaid expenses and deposits- non-current (Note 5)		145,175	145,175
Goodwill (Note 10)		8,982,000	-
Total Assets	$	26,777,823$	17,187,165
Liabilities
Current
Accounts payable and accrued liabilities (Notes 8, 12)	$	1,990,778 $	1,788,736
Current portion of lease liability (Note 9)		471,714	471,728
		2,462,492	2,260,464
Lease liability, net of current portion (Note 9)		7,965,729	8,194,927
Convertible debentures (Note 8)		2,869,610	2,819,651
Total Liabilities		13,297,831	13,275,042
Shareholders' Equity
Capital stock (Note 11)		22,698,352	12,250,924
Contributed surplus		2,725,264	2,344,433
Deficit		(11,943,624)	(10,683,234)
		13,479,992	3,912,123
Total Liabilities and Shareholders' Equity	$	26,777,823$	17,187,165

The accompanying notes are an integral part of these interim condensed consolidated financial statements

Commitments and contingencies (Note 14) Subsequent events (Note 15)

APPROVED ON BEHALF OF THE BOARD

“Matt Lurie” “Kevin Williams” Director Director

2

Organic Garage Ltd.

Consolidated Statements of Loss and Comprehensive Loss (Expressed in Canadian dollars) (Unaudited)

	Three months	Three months	ended	Six months ended	Six months ended	Six months ended
	July	31,		July 31,
	2021		2020	2021		2020
Sales	$6,834,507	$	8,063,735	$ 13,823,196	$	16,016,611
Cost of sales (Note 4)	4,585,311		5,869,810	9,544,505		11,388,776
Gross profit	**2,249,196 **		2,193,925	4,278,691		4,627,835
Expenses
Store wages and benefits	552,165		667,556	1,013,632		1,152,187
Rent	160,453		176,103	299,171		328,536
Administrative wages and benefits (Note 12)	258,493		332,610	449,379		614,210
Utilities	82,200		93,631	175,901		183,338
Shareholders' communication and marketing	82,430		18,000	179,327		36,000
Professional fees (Note 12)	83,471		57,374	185,084		112,565
Repairs and maintenance	84,277		74,649	151,509		144,951
Bank charges and merchant fees	223,133		200,609	415,228		261,882
Store supplies	29,194		41,832	75,994		73,180
Office and general	19,468		24,049	49,138		51,246
Transportation	3,979		30,449	10,155		77,979
Insurance	34,586		17,902	54,212		35,802
Financing costs (Notes 8, 9)	325,439		356,456	665,613		707,625
Telephone	7,384		7,500	15,830		14,790
Regulatory and filing	19,972		700	93,053		1,400
Advertising and promotion	3,414		4,657	4,502		21,958
Depreciation (Note 6)	350,853		292,541	739,483		815,831
Stock-based compensation (Notes 11, 12)	312,996		-	612,179		8,211
Total expenses	2,633,907		2,396,618	5,189,390		4,641,691
Other expenses (income)
Interest income	(1,581)		(969)	(1,387)		(1,535)
Finder's fees - acquisition (Note 10)	-		-	462,300		-
Loss on disposal of assets	-		-	52,518		-
Gain on right-of-use asset sublease (Note 7)	-		-	(163,740)		-
Total other expenses (income)	(1,581)		(969)	349,691		(1,535)
Net loss and comprehensive loss	$ (383,130)	$	(201,724)	$(1,260,390)	$	(12,321)
Basic and diluted loss per share	$ (0.01)	$	(0.01)	$ (0.02)	$	(0.00)
Weighted average number of common
shares outstanding	59,444,172	38,365,084		57,937,045		37,594,758

The accompanying notes are an integral part of these interim condensed consolidated financial statements

3

Organic Garage Ltd.

Interim Condensed Consolidated Statements of Changes in Shareholder's Equity For the six months ended July 31, 2021 and 2020 (Expressed in Canadian dollars) (Unaudited)

Share capital

					Total
	Number of		Contributed		Shareholders'
	shares	Amount	surplus	Deficit	Equity
Balance, January 31, 2020	37,201,740$ 10,926,017		$ 2,343,637	$ (10,419,912)	$ 2,849,742
Stock-based compensation (Note 11)	-	-	8,211	-	8,211
Common shares issued for interest (Note 11)	1,305,024	143,292	-	-	143,292
Net loss for theperiod	-	-	-	(12,321)	(12,321)
Balance, July 31, 2020	38,506,764$ 11,069,309		$ 2,351,848	$ (10,432,233)	$ 2,988,924
Balance, January 31, 2021	44,007,982$ 12,250,924		$ 2,344,433	$ (10,683,234)	$ 3,912,123
Stock-based compensation (Note 11)	-	-	612,179	-	612,179
Exercise of stock options (Note 11)	780,000	512,148	(231,348)	-	280,800
Exercise of warrants	256,000	84,480	-	-	84,480
Common shares issued for interest (Note 11)	224,624	142,500	-	-	142,500
Common shares issued for acquisition (Note 10)	13,800,000	9,246,000	-	-	9,246,000
Common shares issued as finder's fees (Note 10)	690,000	462,300	-	-	462,300
Net loss for theperiod	-	-	-	(1,260,390)	(1,260,390)
Balance, July 31, 2021	59,758,606$ 22,698,352		$ 2,725,264	$ (11,943,624)	$ 13,479,992

The accompanying notes are an integral part of these interim condensed consolidated financial statements

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Organic Garage Ltd.

Consolidated Statements of Cash Flows For the six months ended July 31, 2021 and 2020 (Expressed in Canadian dollars) (Unaudited)

Organic Garage Ltd. Consolidated Statements of Cash Flows For the six months ended July 31, 2021 and 2020 (Expressed in Canadian dollars) (Unaudited)
	July 31,	July 31,
	2021	2020
Cash flows from (used in) operating activities
Net loss for the period	$ (1,260,390)	$ (12,321)
Items not affecting cash:
Accretion	49,959	50,234
Depreciation	739,483	815,831
Accrued interest on convertible debenture	71,250	71,250
Issuance of common shares for interest	71,250	71,250
Loss on disposal of assets	52,518	-
Finder's fee - acquisition	462,300	-
Gain on right-of-use asset sublease	(163,740)	-
Stock-based compensation	612,179	8,211
	634,809	1,004,455
Net changes in non-cash working capital
Accounts receivable	10,708	(48,072)
Inventory	(19,437)	149,261
Prepaid expenses and deposits	(18,042)	5,703
Accounts payable and accrued liabilities	202,042	(120,347)
	810,080	991,000
Cash flows from (used in) financing activities
Exercise of options	280,800	-
Exercise of warrants	84,480	-
Repayment of lease liabilities	(229,212)	(182,388)
	136,068	(182,388)
Cash flows from (used in) investing activities
Lease payments received, net of commission	5,530	-
Acquisition - net of cash	260,000	-
Proceeds from disposition of equipment	89,000	-
Purchase of property and equipment	(403,292)	(99,936)
	(48,762)	(99,936)
Increase in cash	897,386	708,676
Cash, beginning of period	1,628,586	194,268
Cash, end of period	$ 2,525,972	$902,944
Supplemental cash flow information:
Accounts payable and accrued liabilities settled with common shares $ 71,250		$ 71,250
Recognition of lease receivable	$ 473,967	$ -
Interest paid	$ -	$ -
Income taxes paid	$-	$-

The accompanying notes are an integral part of these interim condensed consolidated financial statements

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Organic Garage Ltd. Notes to Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited)

1. NATURE OF OPERATIONS

Organic Garage Ltd. (the "Company" or “Organic Garage”) was incorporated on July 25, 2011 under the Business Corporations Act (British Columbia) (“BCCA”). The Company’s common shares are listed for trading on the TSX Venture Exchange (the “TSX-V”) (Tier 1 Issuer) under the trading symbol “OG”. The Company’s OTCQX symbol is OGGFF and on the Frankfurt Stock Exchange under the ticker symbol 9CW1.

Organic Garage is an independent, Ontario-based natural and organic grocery chain with 4 stores operating in the Greater Toronto area. Organic Garage’s main business activities are selling natural and organic products to consumers through its retail network of store locations. The Company operates its business through its wholly-owned subsidiary, Organic Garage (Canada) Ltd. (“OGC”), which also has seven wholly-owned subsidiaries whose primary business is to hold its premises leases. OGC and each subsidiary was incorporated under the Business Corporations Act (Ontario) (the “OBCA”). The Company has two additional numbered company subsidiaries with no current operations. The Company has one operations subsidiary which was formed during an amalgamation agreement with the Future of Cheese Company Corp. on February 17, 2021 (Note 10).

The registered and records office of Organic Garage is located at 610 – 475 West Georgia Street, Vancouver, BC V6B 4M9, and its head office and mailing address is 579 Kerr Street, Oakville, ON, L6K 3E1.

In early 2020, there was a global outbreak of COVID-19, which continues to rapidly evolve. The extent to which the COVID-19 coronavirus may impact the Company’s operations will be dependent on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions, and social distancing in Canada and other countries, business closures or business disruptions, and the effectiveness of actions taken in Canada and other countries to contain and treat the disease. Starting in early 2020, the province of Ontario, in which all of the Company’s stores are located, has implemented varying levels of province wide shutdowns and lockdowns of businesses. To date, the Company’s locations have been considered an essential service and have not been subject to any mandatory closures, reduced hours, or any other material operational restrictions.

2. BASIS OF PREPARATION AND USE OF ESTIMATES AND JUDGMENTS

(a) Statement of compliance

The interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”) and should be read in conjunction with the Company’s annual consolidated financial statements for the year ended January 31, 2021 which have been prepared according to International Financial Reporting Standards as issued by the IASB.

These interim condensed consolidated financial statements were approved and authorized by the Board of Directors of the Company on September 29, 2021.

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Organic Garage Ltd. Notes to Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited)

2. BASIS OF PREPARATION AND USE OF ESTIMATES AND JUDGMENTS - CONTINUED

(b) Basis of measurement

The interim condensed consolidated financial statements of the Company were prepared on a historical cost basis except where certain financial instruments that are required to be measured at fair value. These interim condensed consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information.

(c) Basis of consolidation

The interim condensed consolidated financial statements of the Company as at and for the six months ended July 31, 2021 and 2020 include the Company and its wholly-owned subsidiaries as follows: OGC and 1047023 B.C. Ltd., and OGC’s seven wholly-owned subsidiaries whose primary business is to hold its premise leases: 2412383 Ontario Inc.; 2347018 Ontario Inc.; 2368123 Ontario Inc.; 2507158 Ontario Inc.; 2557479 Ontario Inc.; 2581751 Ontario Inc.; and 2664699 Ontario Ltd. One operating subsidiary, The Future of Cheese Company Corp. is also whollyowned, and balances related to this entity have been consolidated as of February 17, 2021. Intercompany balances and transactions are eliminated in preparing these consolidated interim condensed financial statements.

(d) Functional currency

The interim condensed consolidated financial statements are presented in Canadian dollars which is the Company's and its subsidiaries’ functional currency.

(e) Use of estimates and key judgments

The preparation of these consolidated interim condensed financial statements in accordance with IFRS requires management to make estimates and judgments that affect the recognition, measurement and disclosure of amounts reported in these consolidated interim condensed financial statements and accompanying notes. The reported amounts and note disclosures are determined using management's best estimates based on assumptions that reflect the most probable set of economic conditions and planned courses of action. Actual results may differ from such estimates.

Significant management judgments

The following are significant management judgments in applying the accounting policies of the Company that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses:

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Organic Garage Ltd. Notes to Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited)

2. BASIS OF PREPARATION AND USE OF ESTIMATES AND JUDGMENTS – CONTINUED

• (e) Use of estimates and key judgments - Continued

Impairment of non-financial assets

At the end of each reporting period, the Company reviews the carrying amounts of its non-financial assets to determine whether there is any indication that the carrying amount is not recoverable. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Management assesses impairment of non-financial assets such as goodwill, and property and equipment. In assessing impairment, management estimates the recoverable amount of each asset or cash generating unit (“CGU”) based on expected future cash flows. The Company has applied judgment in its assessment of the appropriateness of the determination of CGU’s. When measuring expected future cash flows, management makes assumptions about future growth of profits which relate to future events and circumstances. Actual results could vary from these estimated future cash flows. Estimation uncertainty relates to assumptions about future operating results and the application of an appropriate discount rate.

Leases

The Company exercises judgment in determining the approximate lease term on a lease by lease basis. The Company considers all facts and circumstances that may create an economic incentive to exercise renewal options and also evaluated the economic incentive related to continuation of existing leaseholds. The Company is also required to estimate specific criteria in order to estimate the carrying amount of right-of-use assets and lease liabilities including the incremental borrowing rate and effective interest rate.

During the six months ended July 31, 2021, the Company entered into a sublease agreement for its warehouse. The sublease was accounted for as a finance lease and a nominal gain was recorded on the disposition of the right-of-use asset related to the lease. The net investment on the sublease was remeasured at the discount rate used for the original lease.

Business Combinations

Management had to apply judgment with respect to whether the acquisition of The Future of Cheese was an asset acquisition or business combination. The assessment required management to assess the inputs, processes and outputs of the company acquired at the time of acquisition. Pursuant to the assessment, The Future of Cheese Acquisition was considered to be a business combination (Note 10). Purchase price allocation involved judgement in identifying assets acquired and liabilities assumed and estimation of their fair values.

Estimation uncertainty

Information about estimates and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

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Organic Garage Ltd. Notes to Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited)

2. BASIS OF PREPARATION AND USE OF ESTIMATES AND JUDGMENTS – CONTINUED

• (e) Use of estimates and key judgments - Continued

Stock-based compensation

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date on which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires the determination of the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them which are disclosed in Note 11.

Allowances for expected credit losses

An ‘expected credit loss’ impairment model requires an allowance to be recognized based on expected credit losses that require management’s estimate and judgment related to the future probability of realized credit losses.

Property and equipment useful life

Changes in the intended use of property and equipment as well as changes in technology or economic conditions may cause the estimated useful life of these assets to change. The change in useful lives could impact the depreciation expense and carrying value of property and equipment.

Inventory

Inventories are carried at the lower of cost and net realizable value which requires the Company to utilize assumptions for estimates and provisions related to fluctuations in shrink, future retail prices and slow- moving inventory.

Lease Receivable

The Company has made several assumptions related to the lease receivable issued by the Company, including discount rates and estimates related to the probability of collectability of future lease payments.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

In preparing these interim condensed consolidated financial statements, the significant accounting policies were the same as those that applied to the Company’s audited consolidated financial statements for the year ended January 31, 2021, except as noted below.

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Organic Garage Ltd. Notes to Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Lease Receivable

Where the Company acts as an intermediate lessor it classifies a sublease as a finance lease by reference to the right-of-use asset arising from the head lease and is measured at amortized cost. The Company derecognizes the right-of-use asset related to the existing lease that it transfers to the sublessee and recognizes a corresponding lease receivable, retaining the lease liability. The lease receivable is periodically reduced by impairment losses, if any, in accordance with IFRS 9, Financial Instruments, and adjusted for any remeasurements of the lease liability.

Financial assets are derecognized when they mature or are sold, and substantially all the risks and rewards of ownership have been transferred.

Business Combinations

A business combination is a transaction or event in which an acquirer obtains control of one or more businesses and is accounted for using the acquisition method. The total consideration paid for the acquisition is cash and the fair value equity instruments issued in exchange for control of the acquiree at the acquisition date. The acquisition date is the date when the Company obtains control of the acquiree. The identifiable assets acquired and liabilities assumed are recognized at their acquisition date fair values, except for deferred taxes and share-based payment awards where IFRS provides exceptions to recording the amounts at fair value. Goodwill represents the difference between total consideration paid and the fair value of the net-identifiable assets acquired. Acquisition costs incurred are expensed in profit or loss.

Based on the facts and circumstances that existed at the acquisition date, management will perform a valuation analysis to allocate the purchase price based on the fair values of the identifiable assets acquired and liabilities assumed on the acquisition date. Management has one year from the acquisition date to confirm and finalize the facts and circumstances that support the finalized fair value analysis and related purchase price allocation. Until such time, these values are provisionally reported and are subject to change. Changes to fair values and allocations are retrospectively adjusted in subsequent periods.

Acquisitions that do not meet the definition of a business combination are accounted for as asset acquisitions. Consideration paid for an asset acquisition is allocated to the individual identifiable assets acquired and liabilities assumed based on their relative fair values. Asset acquisitions do not give rise to goodwill.

Goodwill

The Company measures goodwill as the fair value of the consideration transferred less the net recognized amount (generally fair value) of the identifiable assets acquired and the liabilities assumed, all measured as of the acquisition date. Since goodwill results from the application of the acquisition method of accounting for a business combination, it requires judgment in the determination of the fair value of assets and liabilities. Goodwill is allocated to the Company’s CGUs or group of CGUs that are expected to benefit from the synergies of the business combination. Goodwill is not amortized, but is tested for impairment at least annually. An impairment loss in respect of goodwill is not reversed. On the disposal or termination of a previously acquired business, any remaining balance of associated goodwill is included in the determination of the gain or loss on disposal. The Company performs the annual goodwill impairment tests on January 31.

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Organic Garage Ltd. Notes to Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited)

4. INVENTORY

Inventory consists of meat, produce and grocery items. The amount of inventory recognized in cost of goods sold was $9,544,505 for the six months ended July 31, 2021 and $11,388,776 for the six months ended July 31, 2020. The Company did not record an expense for the write-down of inventory below cost to net realizable value or reversals of inventory written down previously for the six months ended July 31, 2021 or July 31, 2020. The Company had $1,424,568 of inventory as of July 31, 2021 (January 31, 2020 - $1,405,131).

5.

PREPAID EXPENSES AND DEPOSITS

Prepaid expenses and deposits are comprised primarily of insurance and rent deposits for stores.

		July 31, 2021	January 31, 2021
Prepaid rent deposits	$	145,175	$ 145,175
Otherprepaids and deposits		39,067	21,025
Total		184,242	166,200
Currentportion		39,067	21,025
Long-termportion	$	145,175	$ 145,175

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Organic Garage Ltd. Notes to Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars)

(Unaudited)

6. PROPERTY AND EQUIPMENT

Cost Balance January 31, 2020 Additions Balance January 31, 2021 Additions (Disposals) Balance July 31, 2021 Accumulated Depreciation Balance at January 31, 2020 Depreciation for the year Balance January 31, 2021 Depreciation for the period Disposals Balance July 31, 2021 Carrying amounts Carrying value at January 31, 2020 Carrying value at January 31, 2021 Carrying value at July 31, 2021	Computer Equipment Computer software Furniture, store fixtures and equipment Leasehold improvements Right-of-use assets Signs, branding and design Vehicle Construction in progress Total 162,080 165,968 5,317,015 2,276,348 9,071,327 638,172 81,818 307,109 18,019,837 2,117 201,138 183,450 15,957 - 11,857 - 15,250 429,769
	164,197 367,106 5,500,465 2,292,305 9,071,327 650,029 81,818 322,359 18,449,606 41,963 10,353 43,871 125,170 - 44,884 113,000 24,052 403,292 - - - - (598,296) - (194,818) - (793,114)
	206,160 377,459 5,544,336 2,417,475 8,473,031 694,913 - 346,411 18,059,783 87,506 118,268 1,318,293 361,710 825,277 234,357 41,079 - 2,986,490 34,033 148,268 402,919 137,475 825,276 81,948 12,221 1,642,140
	121,539 266,536 1,721,212 499,185 1,650,553 316,305 53,300 - 4,628,630 12,907 52,873 200,279 66,608 368,321 34,494 - 735,483
	- - - - (288,069) - (53,300) (341,369)
	134,446 319,409 1,921,491 565,793 1,730,805 350,799 - - 5,022,744 74,574 47,700 3,998,722 1,914,638 8,246,050 403,815 40,739 307,109 15,033,347 42,658 100,570 3,779,253 1,793,120 7,420,774 333,724 28,518 322,359 13,820,976 71,714 58,049 3,622,845 1,851,682 6,742,225 344,113 - 346,411 13,037,039

*Construction in progress represents construction of the Company’s Leaside store.

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Organic Garage Ltd. Notes to Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited)

7. LEASE RECEIVABLE

On March 29, 2021, the Company entered into a sublease agreement for its warehouse location until the termination of the lease on July 30, 2023. The Company recognized a lease receivable of $473,967 consisting of $564,445 of future cash payments discounted over the remaining term of the lease at 10.5%. The Company recorded a gain on right of use asset associated with the derecognition of the Right of Use Asset for the remaining term of the warehouse lease of $163,740. In connection with the sublease, the Company paid a commission of $35,341 during the six months ended July 31, 2021 which is capitalized to the lease receivable.

8. CONVERTIBLE DEBENTURES

On October 25, 2019, the Company issued convertible debentures (the “Convertible Debentures”) for net proceeds of $2,925,000, face value of $3,000,000, including an original issue discount of $75,000. The principal and interest under the Convertible Debentures are convertible at the election of the holders of the Convertible Debentures (the “Holders”) upon maturity at a conversion price of $0.11 per unit (the “Unit(s)”), subject to conventional antidilution adjustments. Each Unit consists of one common share and one half of one warrant, each whole warrant exercisable at $0.18 per common share for a period of 36 months following the date of issuance.

	Liability Component Contributed Surplus
Balance, January 31, 2019	$ - $ -
Issued during period	2,623,451 301,549
Discount Liability	67,942 -
Accretion	27,239 -
Balance, January 31, 2020	$ 2,718,632 $ 301,549
Accretion	101,019 -
Balance, January 31, 2021	$ 2,819,651 $ 301,549
Accretion	49,958 -
Balance, July 31, 2021	$ 2,869,609 $ 301,549

Interest related to the convertible debentures for the six months ended July 31, 2021 was $141,329 (2020 - $142,110) and has been included in financing costs and accounts payable and accrued liabilities as of July 31, 2021. Accretion of $49,958 (2020 – $50,234) has been included in financing costs for the six months ended July 31, 2021.

During the six months ended July 31, 2021, the Company issued 224,624 common shares (2020 – 1,305,024) fair valued at $142,500 (2020 - $143,292) to settle interest related to the convertible debentures.

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Organic Garage Ltd. Notes to Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited)

9. LEASE LIABILITIES

Balance - January 31, 2020 Lease payments Interest expense on lease liabilities Balance - January 31, 2021 Lease payments Interest expense on lease liabilities Balance - July 31, 2021 Lease liabilities due within one year Lease liabilities - long term Total lease liabilities	$ 9,046,148
	(1,405,741) 1,026,248
	$ 8,666,655
	(720,571) 491,359
	$ 8,437,443
	$ 471,714 7,965,729
	$ 8,437,443

The Company makes variable lease payments for property tax, insurance, and maintenance on leased properties. During the six months ended July 31, 2021, $299,171 was expensed through rent for the variable lease payments.

10. ACQUISITION OF THE FUTURE OF CHEESE COMPANY

On February 17, 2021, the Company entered into an amalgamation agreement with the Future of Cheese Company to acquire 100% of the outstanding shares through the issuance of 13,800,000 common shares of the Company. The strategic acquisition was completed to expand the Company into the business of developing, manufacturing, and marketing plantbased dairy alternative products.

The purchase price was estimated at a fair value of $9,246,000. The fair value of the recognized goodwill of $8,986,000 was recorded in relation to the acquisition based on the fair value of net assets acquired and consideration paid.

In accordance with IFRS 3 – Business Combinations, the substance of the transaction constitutes a business combination given substantive processes were acquired. Accordingly, the net assets acquired have been recorded at their respective estimated fair values as of the acquisition date. Management used the replacement cost approach to estimate the fair value of the net assets acquired. The purchase price is based on management’s estimate of fair value of the common shares issued.

In addition, the Company issued 690,000 common shares as finder’s fees, fair valued at $462,300. This amount was expensed during the six months ended July 31, 2021 in accordance with IFRS 3.

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Organic Garage Ltd. Notes to Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited)

10. ACQUISITION OF THE FUTURE OF CHEESE COMPANY - CONTINUED

The allocation of the purchase price consideration is as follows:

Purchase price Fair value of common shares issued (13,800,000 at $0.67 per share) Total Consideration paid Allocated as follows: Cash Intellectual property Website and media accounts Equipment Net Assets acquired Goodwill acquired	$ 9,246,000
	$ 9,246,000 $ 260,000 20,000 5,000 4,000
	289,000 $ 8,957,000

Goodwill represents brand identity, management team and specialized knowledge for creating and producing plant based dairy products.

Since the acquisition of the Future of Cheese Company, the Company has not generated revenues and has incurred expenditures of $31,716.

11. CAPITAL STOCK

Authorized share capital

Unlimited number of common shares without par value.

Issued share capital

At July 31, 2021, there were 59,758,606 common shares issued and fully paid (January 31, 2021 – 44,007,982).

During the six months ended July 31, 2021:

On February 17, 2021, 13,800,000 common shares for the acquisition of 100% of the shares of the Future of Cheese Company, fair valued at $9,246,000 and 690,000 common shares as finder’s fees, fair valued at $462,300 (Note 10).

On March 31, 2021, the Company issued 90,190 common shares as settlement of payments of interest of $71,250 accrued between November 1, 2020 to January 31, 2021 related to the Company’s convertible debentures. The shares were issued at a fair value of $0.78 per common share.

On June 23, 2021, the Company issued 134,434 common shares as settlement of payments of interest of $71,250 accrued between February 1, 2021 to April 30, 2021 related to the Company’s convertible debentures. The shares were issued at a fair value of $0.53 per common share.

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Organic Garage Ltd. Notes to Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited)

11. CAPITAL STOCK - CONTINUED

The Company issued 780,000 common shares for the exercise of 780,000 stock options. Cash proceeds of $280,800 were received by the Company.

The Company issued 256,000 common shares for the exercise of 256,000 warrants. Cash proceeds of $84,480 were received by the Company.

During the six months ended July 31, 2020:

On March 3, 2020, the Company issued 626,452 common shares as settlement of payments of interest of $72,042 accrued between November 1, 2019 to January 31, 2020 related to the Company’s convertible debentures. The shares were issued at $0.115 per common share.

On May 21, 2020, the Company issued 678,572 common shares as settlement of payments of interest of $71,250 accrued between February 1, 2020 and April 30, 2020 related to the Company’s convertible debentures. The shares were issued at $0.105 per common share.

Stock Options

The Company has a stock option plan (the “Plan”) available to employees, directors, officers and consultants with grants under the Plan approved from time to time by the Board of Directors. Under the Plan, the Company is authorized to issue options to purchase an aggregate of up to 10% of the Company's issued and outstanding common shares. Each option can be exercised to acquire one common share of the Company. The exercise price for an option granted under the Plan may not be less than the market price at the date of grant less a specified discount dependent on the market price.

On January 29, 2021, the Company granted 960,000 stock options with a five-year term at an exercise price of $0.74 per share, vesting 50% on February 1, 2021 and 50% on May 1, 2021. On June 14, the Company granted 100,000 stock options with a five-year term at an exercise price of $0.51, vesting 50% on June 14, 2021 and 50% on September 14, 2021.

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Organic Garage Ltd. Notes to Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited)

11. CAPITAL STOCK - CONTINUED

Options to purchase common shares have been granted to directors, employees and consultants as follows:

Exercise	Exercise	Expiry	January 31,					July 31,
Price		Date	2021	Granted	Exercised	Expired		2021
$	0.36	7/31/2022	2,755,000	-	(780,000)		-	1,975,000
$	0.42	7/3/2023	200,000	-	-		-	200,000
$	0.50	9/15/2023	200,000	-	-		-	200,000
$	0.40	5/1/2024	250,000	-	-		-	250,000
$	0.74	1/29/2026	960,000	-	-		-	960,000
$	0.51	6/14/2026	-	100,000	-		-	100,000
Totaloutstanding			4,365,000	100,000	(780,000)		-	3,685,000
Totalexercisable			4,365,000	50,000	(780,000)		-	3,635,000
Exercise		Expiry	January 31,					July 31,
Price		Date	2020	Granted	Exercised	Expired		2020
	$0.36	7/31/2022	2,780,000	-	-	-		2,780,000
	$0.42	7/3/2023	200,000	-	-	-		200,000
	$0.50	9/15/2023	200,000	-	-	-		200,000
	$0.40	5/1/2024 -		250,000	-	-		250,000
Totaloutstanding			3,180,000	250,000	-	-		3,430,000
Totalexercisable			3,180,000	250,000	-	-		3,430,000

The following is a summary of stock option	activity from January 31,	2020 to July	31, 2021:
	Number of options	Weighted Average Exercise Price
Balance outstanding at January 31, 2020	3,430,000		0.36
Exercised	(25,000)		0.36
Issued	960,000		0.74
Balance outstandingatJanuary 31,2021	4,365,000		0.46
Exercised	(780,000)		0.36
Issued	100,000		0.51
Balance outstandingat July31,2021	3,685,000		0.48

17

Organic Garage Ltd. Notes to Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited)

11. CAPITAL STOCK - CONTINUED

The Company has recorded a total of $612,179 as stock-based compensation expense, being the fair value of the options vested during the six months ended July 31, 2021 (2020 - $8,211). The fair value of the options have been estimated at the date of grant using the Black-Scholes pricing model with the following weighted average assumptions:

	Six months ended
	July 31, 2021
Risk-free interest rate (average)	0.38%
Estimated volatility (average)	122%
Expected life in years	5
Expected dividend yield	0.00%
Estimated forfeitures	0.00%
Grant date fair valueper option (average)	$0.59

Option pricing models require the use of highly subjective estimates and assumptions. The expected volatility assumption is based on the historical and implied volatility of the Company’s common share price. The risk-free interest rate assumption is based on yield curves on Canadian government zero-coupon bonds with a remaining term equal to the stock options’ expected life. The Company uses historical data to estimate option exercise, forfeiture and employee termination within the valuation model.

As of July 31, 2021, the weighted average remaining life of the 3,685,000 stock options outstanding at the end of the period was 2.25 years.

Warrants

The following is a summary of warrant activity through July 31, 2021:

	Number of Warrants	Weighted Average
		Exercise
		Price
Balance, January 31, 2020	6,817,800	$ 0.35
Expired during the year	(6,817,800)	$ 0.35
Issued during the year	4,090,800	$ 0.33
Balance, January 31, 2021	4,090,800	$ 0.33
Exercised	(256,000)	$ 0.33
Balance, July 31, 2021	3,834,800	$ 0.33

As of July 31, 2021, the weighted average remaining life of the 3,834,800 warrants outstanding at the end of the period was 1.42 years.

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Organic Garage Ltd. Notes to Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited)

12. RELATED PARTY BALANCES AND TRANSACTIONS

Related parties include the Board of Directors, officers, close family members and enterprises that are controlled by these individuals as well as certain persons performing similar functions. All transactions with related parties were completed at fair market value.

The Company’s key operational management personnel are comprised of the President, Director of Operations, Director of Marketing, Controller and Manager of Human Resources. Total compensation earned by key management personnel for the six months ended July 31, 2021 was $195,354 and was comprised of salaries and other short-term employee benefits (2021 - $208,760) and stock- based compensation to directors was $598,366 (2021 - $8,211).

As at July 31, 2021, the Company had $nil (2021 - $nil) in accounts payable and accrued liabilities owing to key management personal and other related parties. All amounts paid to these related parties are included in administrative wages and benefits.

The Company also paid, during the six months ended July 31, 2021, $48,000 to an entity affiliated with the current CFO for services rendered (2021 - $48,000), and all amounts paid to the current CFO and prior CFO are included in professional fees.

13. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

(a) Classification

Classification determines how financial assets and financial liabilities are accounted for in financial statements and, in particular, how they are measured on an ongoing basis. IFRS 9 Financial Instruments approach for the classification of financial assets is driven by cash flow characteristics and the business model in which an asset is held. This single, principle-based approach replaces prior rule-based requirements. The model also results in a single impairment model being applied to all financial instruments.

The Company’s financial assets and liabilities are classified as follows:

Financial assets
Cash	Fair value through profit and loss
Prepaid expenses and deposits	Amortized cost
Accounts receivable	Amortized cost
Lease receivable	Amortized cost
Financial liabilities
Accounts payable and accrued liabilities	Amortized cost
Lease liabilities	Amortized cost
Convertible debentures	Amortized cost

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Organic Garage Ltd. Notes to Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited)

13. FINANCIAL RISK MANAGEMENT - CONTINUED

(b) Fair value measurement

Fair value measurements are made using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value:

• Level 1 – defined as observable inputs such as quoted prices in active markets;

• Level 2 – defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

• Level 3 – defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The fair value measurement is categorized in its entirety by reference to its lowest level of significant input.

• (i) Cash – Level 1

Fair value is based on cost as the carrying value is approximately its fair value.

• (ii) Accounts receivable, prepaid expenses and deposits and accounts payable and accrued liabilities - Level 1

Fair value is based on estimated cash flows, discounted at interest rates for similar instruments. The carrying amount approximates fair value due to the short-term maturity of these instruments.

• (iii) Convertible debentures, Lease Liabilities and Lease Receivable – Level 2

Fair value is based on the present value of contractual cash flows, discounted at the Company's current incremental borrowing rate for similar types of borrowing arrangements. The carrying amounts approximate fair value due to the majority of the long-term debt bearing fixed interest rates.

(c) Liquidity risk

Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they come due in the normal course of business. Liquidity risk also includes the risk of not being able to liquidate assets in a timely manner at a reasonable price. Difficulty accessing capital markets could impair the Company's capacity to grow, execute its business model and generate financial returns. The Company manages its liquidity risk by monitoring its operating requirements to ensure financial resources are available, actively monitoring market conditions and by diversifying its sources of funding and maintaining a diversified maturity profile of its debt obligations. Refer to Note 14 for analysis of commitments.

(d) Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company's main credit risk relates to its cash, lease receivable and accounts receivable. The Company's credit risk is reduced by a broad customer base and a review of customer credit profiles.

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Organic Garage Ltd. Notes to Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited)

(c) Credit risk - Continued

The Company’s maximum exposure to credit risk corresponds to the carrying amount for all cash, accounts receivable and lease receivable. Cash is held with prominent financial institutions. Accounts receivable are held with vendors in which the Company has a historically strong relationship with or related to HST receivable. Lease receivable is held with an independent third party and managed by a commercial real estate agency.

The Company mitigates credit risk associated with its trade receivables through established credit approvals, limits and a regular monitoring process. The Company generally considers the credit quality of its financial assets that are neither past due nor impaired to be solid. Credit risk is further mitigated due to the large number of customers and their dispersion across geographic areas.

Receivables are substantially comprised of balances due from vendors for marketing, rebates and allowances. The due date of these amounts can vary by agreement but in general balances over 30 days are considered past due. The aging of the receivables is as follows:

	July 31, 2021	July 31, 2021	January 31, 2021
0 – 30 days	$	160,564	$ 171,272
31 – 90 days		-	-
Greaterthan91days		-	-
Total accounts receivable before
allowance for credit losses		160,564	171,272
Less: allowance for credit losses		(5,000)	(5,000)
Accounts receivable			$
	$	155,564	166,272

Allowance for credit losses is reviewed at each reporting period. As at July 31, 2021, the Company has an expected credit loss provision of $5,000 (2021 - $5,000). The Company recorded $nil bad debts (2020 - $nil). The credit loss provision is based on the Company’s analysis of current accounts receivable and historical recovery of receivable balances.

The Company currently does not have an allowance for losses related to lease receivable which are held with a third-party. The Company considers lease receivable balances that are not past due to be recoverable and not requiring any allowance.

(d) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk.

(i) Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company is not exposed to significant currency risk.

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Organic Garage Ltd. Notes to Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited)

13. FINANCIAL RISK MANAGEMENT - CONTINUED

(d) Market risk - Continued

• (ii) Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its convertible debentures. The Company manages interest rate risk by monitoring its debt levels and having fixed interest rates on its convertible debentures.

(iii) Other price risk

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Company is not exposed to other price risk.

(e) Capital management

The Company’s capital consists of total shareholders’ equity and convertible debentures. The Company's capital management is designed to ensure that it has sufficient financial flexibility both in the short and long-term to support its financial obligations and the future development of the business.

The Company manages its capital with the following objectives:

• (i) Ensuring sufficient liquidity is available to support its financial obligations and to execute its operating strategic plans;

• (ii) Maintaining financial capacity and flexibility through access to capital to support future development of the business;

• (iii) Minimizing its cost of capital and considering current and future industry, market and economic risks and conditions; and

• (iv) Utilizing short-term funding sources to manage its working capital requirements and long- term funding sources to match the long-term nature of the property, plant and equipment of the business.

There were no changes to the Company’s approach to capital management during the period ended July 31, 2021. The Company is not subject to externally imposed capital requirements.

22

Organic Garage Ltd. Notes to Interim Condensed Consolidated Financial Statements For the six months ended July 31, 2021 and 2020 (Expressed in Canadian Dollars) (Unaudited)

14. COMMITMENTS AND CONTINGENCIES

In the ordinary course of operating the Company’s business it may from time to time be subject to various claims or possible claims. Management is of the position that there are no claims or possible claims that if resolved would either individually or collectively result in a material adverse impact on the Company’s financial position, results of operations or cash flows.

The Company, directly or through its subsidiaries, has entered into various debt agreements expiring October 2022 and various lease agreements expiring between March 2025 and March 2039. The Company has entered into a twenty-year lease agreement that has yet to commence as at July 31, 2021. The future minimum annual payments of the existing leases and future lease commitments have been included in the table below.

Future minimum annual cash payments required under the debt and leases agreements are as follows:

Accounts payable and accrued liabilities Lease liabilities Convertible debentures Total	2022 2023 2024 2025 2026 Thereafter $ $ $ $ $ $ $
	1,990,778 1,990,778 - - - -- 25,787,200 1,459,350 1,468,314 1,292,788 1,293,740 1,159,396 10,880,891 3,000,000 - 3,000,000 - - --
	30,777,978 3,450,128 4,468,314 1,292,788 1,293,740 1,159,396 10,880,891

15. SUBSEQUENT EVENTS

On September 3, 2021, the Company issued 206,522 common shares as settlement of payments of interest of $71,250 accrued between May 1, 2021 and July 31, 2021 related to the Company’s convertible debentures. The shares were issued at $0.34 per common share.

On September 9, 2021, the Company filed a preliminary short form base shelf prospectus with the securities commissions in the provinces of Ontario, British Columbia, Alberta, Manitoba and Saskatchewan. Upon receipt for the final shelf prospectus from the applicable regulators it will allow the Company to offer and issue common shares, warrants, subscription receipts, units, or any combination of the foregoing during the 25-month period in which it is effective.

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